Pak-German Economic Diplomacy

VIEW :Pak-German economic diplomacy — Fakiha Hassan Rizvi

Germany and Pakistan have maintained a cordial relationship since the late 1940s. Germany is home to more than 30,000 Pakistani immigrants and more than 1,200 Germans are currently residing in Pakistan (mostly in Karachi, Lahore and Peshawar). Almost 2,000 Pakistani students are currently studying in German institutions to pursue higher education. After the United States, China and Saudi Arabia, Germany also plays an influential role in the domestic politics of Pakistan. The interest of German economists in the South Asian region has engaged the country in economic diplomacy with Pakistan. This is the reason that Germany is the largest trading partner of Pakistan in Europe. It is also the fifth biggest source of foreign investment in the country. Several German multinational companies have been making lucrative businesses in Pakistan for decades. The German Federal Statistical Office shows that Pakistan’s exports to Germany increased by over 76 percent while bilateral trade volume increased by two percent during the past four years. Foreign Direct Investment (FDI) flowing from Germany into Pakistan has also enhanced. Interestingly, the newly elected government of Pakistan hosted the first foreign leader on June 8, 2013, Germany’s Foreign Minister Mr Guido Westerwelle. He defined his visit as a trigger for “new momentum” in the bilateral relationship between the two countries.

Germany has promised to stand by the new government in Pakistan and respects the mandate of the Pakistani people. It is worth remembering that during April 1998, Prime Minister Nawaz Sharif (who was the then Prime Minister as well) went to visit Germany, Poland and Brussels to improve economic ties. He said in Brussels at an official reception, “We [Pakistan] seek understanding and cooperation with Europe.” At that time Mr Sharif was Pakistan’s first ever business leader. Pakistan stitched associations with Germany and the European Community in general to integrate itself with the global economic order. In the 1990s, Pakistan and Germany sought a business alliance in the form of the Pakistan German Business Forum. This forum came into existence in 1997, again during the ‘Nawaz era’. After the country became a nuclear power in May 1998, Germany did not criticise Pakistan nor did it support it. In addition to this, the Germans were critical of India’s role in the Kargil war and remained silent supporters of Pakistan. During the Musharraf regime, Germany became one of Pakistan’s most important allies in the war in northwest Pakistan between Pakistan and the Taliban.

After the democratic transition in Pakistan, the economic condition of the country was abysmal. Bilateral Trade Investment Treaty signed in December 2009 with Germany opened a new chapter in economic ties and helped reinforce business relations. The contribution of the German parliament and people for the flood victims in Pakistan during 2010 was unprecedented. Out of an aid worth $ 300 million, an amount of $ 210 million was donated by ordinary German people. Germany had also been generous enough to support Pakistan in getting a larger share in exports to the European Union. However, the perception of German people about Pakistanis is quite low. According to a 2013 BBC World Service Poll, only five percent of Germans view Pakistan’s influence positively, with 82 percent expressing a negative view. This view should be dispelled by the new government in Pakistan under the leadership of Mr Sharif.

While Germany aspires to see Pakistan as a ‘regional power’ and economic hub of South Asia, Pakistan should strive to maintain a positive image back in Germany. Students, media and young Pakistanis employed in Germany can play a decisive role in this regard. In the recent visit of Mr Westerwelle, an assistance of 93.5 million Euros is promised. Following the historic trend of friendship, Prime Minister Sharif has once again invited German investors to help Pakistan with the ailing energy sector, in particular. The German Foreign Minister has indicated the continuity of support to Pakistan’s request for preferential trade plus (GSP) status in the European Union. The two countries have agreed upon the upgrading of Pak-German forum into a bilateral chamber of commerce. The support from Germany just days after the Pakistan Muslim League-Nawaz has assumed power is a healthy sign. It depicts the resolve of Germany to maintain a smooth and strong bilateral relationship with Pakistan. For the stabilisation of the Pakistani economy, the European trading partner wants democracy to pay its dividends. The economic revival is directly linked with a good perception of Pakistan in countries like Germany that offer financial assistance via development in the sectors of energy and health. The benefit of the doubt is being given to the cabinet by foreign investors, who have been sceptical of Pakistan’s economic transparency. Funds should be used justly and transparently to ensure that economic diplomacy between Pakistan and Germany flourishes. Only then can the new government expect to regain the confidence of other countries willing to invest in Pakistan, but reluctant due to bad governance and corruption.